Red Hat Revenues Power Forward in 2015

Red Hat reported its first quarter fiscal 2015 revenues on June 18, showing continued demand and momentum for its Linux and open-source technologies. Red Hat has been particularly busy of late, acquiring a pair of companies and launching its Red Hat Enterprise Linux 7 (RHEL) flagship platform.

For the quarter, Red Hat reported revenue of $424 million, which is a 17 percent year-over-year gain.

"The main driver of our total revenue growth was subscription revenue of $372 million," Red Hat CFO Charlie Peters said during his company's earnings call. "Subscription revenue was up 18 percent year-over-year and it's important to point out that this renewable revenue stream now constitutes 88 percent of total revenue."

Looking forward, Red Hat provided second quarter guidance for approximately $432 million to $436 million in revenue.

One of the key metrics for growth that Red Hat provides is its top 30 deals during a given quarter. Peters noted that for the first time, all of the top 30 deals were valued at over $1 million.

"We also had a Q1 record with four deals that were in excess of $5 million and one that was greater than $10 million," Peters said. "Cross-selling was strong with 65 percent of these deals including one or more components from our group of applications development and emerging technologies offerings."

At the core of Red Hat's product portfolio is the Red Hat Enterprise Linux platform, which hit a major milestone last week with the debut of RHEL 7.

"RHEL 7 is significant because it was designed to meet both modern data center and next generation IT requirements for cloud, Linux containers and Big Data," Red Hat CEO Jim Whitehurst said during the earnings call. "As the worlds of physical, virtual and cloud systems converge Red Hat Enterprise Linux 7 delivers a true foundation for open hybrid cloud that will serve as the backbone for future application architectures."

Acquisitions and Cloud Provide Opportunities for Further Growth

Red Hat has also been busy acquiring a pair of companies that further expand the company's ability to grow. In April, Red Hat acquired Inktank, the lead commercial sponsor behind the Ceph open-source storage filesystem. And on June 18, Red Hat announced the acquisition of OpenStack services vendor eNovance.

"With eNovance as a part of the Red Hat consulting team, we can enhance our consulting resources to be able to reach more customers with world-class OpenStack technologies and implementation services," Whitehurst said.

While cloud remains a growth opportunity for Red Hat, Whitehurst sees growth also coming from continuing to take market share away from other server operating system platforms. In particular, Whitehurst noted that there is still a continued move from mainframe and Unix to Linux.

"I was just on the phone today with a massive European customer that is literally just ready to start on the journey right now," Whitehurst said. "We continue to believe we're taking share from Windows especially with net new workloads."

Another driver of growth for Red Hat is the maturity and expansion of its sales force.

"We definitely have more boots on the street because we have been hiring consistently," Whitehurst said. "But I think our sales guys are more experienced, they are better trained, their confidence level is high and their enthusiasm is high."